The Institute of Directors (IoD) has urged the government to permit older individuals to withdraw money from their pension pots in order to fund a new business.

The business group is calling on the government to allow older people to make limited, tax-free withdrawals from their personal pension pots to finance start-ups. Such withdrawals would be in addition to the current 25% tax-free allowance.

A ‘shadow personal allowance’ could also be introduced, which would be offset against an individual’s income tax liability, the IoD said.

The lobby group is also urging the government to make the UK tax system ‘flexible’ to encourage workers to access different types of training over the course of their working life.

Commenting on the proposals, Lady Barbara Judge, Chairman of the IoD, said: ‘It is a cause for celebration that an increasing number of experienced workers are going it alone as entrepreneurs. They are people with wisdom, experience and good judgement, who can have many years of productive work ahead of them.

‘People in their sixties now are on the front line of the shifting boundaries between work and retirement. The government should consider introducing tax incentives to encourage people to pursue their ideas and invest in training, so that they can continue to have fulfilling working lives beyond the age expected by previous generations.’